It is always dangerous making predictions, particularly predictions about the future. The best bet is probably to make them regularly, updating them as needs be. So here is one prediction that will last until Christmas, or at least as long as it takes to read this column: bank shares are a good buy. This is not to suggest that they have been a good buy in the past. They have been a downright awful item to have in your portfolio - although having a portfolio itself in the past year has been a pretty lousy investment. If you want to spook any American looking to retire in the next few years, just sneak up behind them and whisper: "401K".
So what is suddenly so good about banks? Bankers are notoriously dim, incapable of determining the difference between a sound investment and one that would send the bank into receivership, if governments weren't so daft as to keep bailing them out. In the past couple of years, their collective stupidity has been overwhelming. Britain's Northern Rock, led by a former business magazine journalist - the very worst kind of person to give anyone financial advice - was one of the first out of the starting blocks to demonstrate just how not to run a home loan portfolio. Its cunning strategy was to borrow short and lend long. The minute the credit markets dried up, Northern Rock suddenly realised it had no money. Matt Ridley, an Old Etonian, was forced to resign and sent back to the editing desk.
The Irish bankers were no smarter. They thought up ingenious ways to dispense the cash they were able to raise, mainly to property investors in the country. Of course this all went wrong when people realised that a bungalow on the edge of Dublin was not worth ?20 (Dh104), never mind ?2 million, and the property market crashed. Bankers in Ireland have been battling with shareholders in the past few weeks, trying to explain their existence. The directors of Allied Irish Bank (AIB), whose shares were worth nearly ?40 each this time last year, have managed to drive them down to ?3.72, a fall of 90 per cent.
This did not sit well with a number of shareholders, in particular Gary Kehoe, a 66-year-old. He went to the meeting armed with a couple of rotten eggs. Once the meeting was under way, he stood up and started throwing his eggs. One hit Dermot Gleeson, the bank's chairman, but the other missed his second target - Eugene Sheehy, the chief executive. As Mr Kehoe was bustled out of the meeting by security, he rued his aim, but had no regrets. "I bought the eggs a month ago and made sure they were really evil smelling - like the board of AIB," the retired decorator said. "I should have bought a gun."
Mr Kehoe spent the past year watching his ?20,000 of shares dwindle to a tenth of their value. "I only brought two eggs because I couldn't afford to buy the half dozen," Irish newspapers reported him as saying. "I didn't throw my shoes, which is probably a greater insult, because I only have one pair of shoes." That is a fair point. In these recessionary times, there is no point throwing things you might need. Mr Kehoe continued to complain as he was marched away. "These directors ? I wouldn't have them direct traffic in a car park. I have five grandchildren, the eldest is nine, and they could run the bank better than these fools," he added.
The board at Irish Life & Permanent (IL&P) did not end up with egg on their faces, but they also came in for some shareholder abuse a week later. According to the Irish Times, Tom Kelly, a banker for 35 years, cried shame on the board for lending money it didn't have and handing out 100 per cent mortgages. (That's a bit rich, you might think, for a banker to start dishing out financial advice, but we will forgive him this time.)
The veteran publisher John Mulcahy, who described himself as a substantial shareholder in the company, took to the podium to deliver his attack on Gillian Bowler. Under her chairmanship, he said, the model of lending pursued by IL&P had gone from "established caution to riotous irresponsibility". This included a loan of ?92m to some "crazy Icelandic banks, when even the dogs on the street knew they were being funded by hot Russian money".
We won't mention some of the shenanigans that US bankers have been up to, because they have been well documented in the past, and besides, it makes my American colleagues red-faced and they have trouble breathing. I have some sympathy for these impoverished shareholders, but they should have known the risks. Stocks can go up and down. But now bank stocks are only going one way: up. That is because 1) they are either owned or guaranteed by governments so, unlike General Motors, they won't go bust, and 2) the government is giving them money at about 0.5 per cent and they are lending it out at more like 5 per cent.
Even the former chairman of Northern Rock could work out that this is good business. Obviously it will be a good business, until one day it isn't. But as the Sovietisation of the United States continues - first the banks, then the car makers and what next, health care? It is time to fill your boots. rwright@thenational.ae